Date:16/10/2008 URL: http://www.thehindubusinessline.com/2008/10/16/stories/2008101651440400.htm

Back TRAI mulls licence fee on tower infra companies

TRAI’s proposal could result in double taxation as the revenue earned by the tower companies has been accounted for in the revenue share paid by the mobile operators leasing out capacity.

Thomas K. Thomas

New Delhi, Oct. 15 Mobile operators such as Bharti Airtel and Reliance Communications that have hived off their tower infrastructure into separate companies may soon have to pay additional licence fee on the revenues they earn from the tower business.

The Telecom Regulatory Authority of India is considering imposing revenue share on the tower companies on the grounds that the Government may be losing out on income.

Telecom companies are required to pay between 6 and 10 per cent of their annual revenues earned from providing services as licence fee to the Government. By hiving off the tower infrastructure into separate companies, these operators do not have to pay any fee to the Government from the revenues earned from leasing out capacity.

Bharti Airtel, for example, earned nearly Rs 1,000 crore from its tower infrastructure Bharti Infratel during the first quarter of this year. The company does not pay any revenue share on this to the Government.

However, industry observers say that TRAI’s proposal could result in double taxation as the revenue earned by the tower companies has been accounted for in the revenue share paid by the mobile operators that lease out capacity. They say that the operators who take capacity from the infrastructure companies are already paying revenue share from the income earned from their subscribers, which in turn is a factor of the cost incurred by the operator, including hiring tower infrastructure.

However, the telecom regulator is considering bringing the tower business under separate licensing to distinguish it from the mobile services licence. Almost all the major telecom operators have demerged their tower arms in a bid to unlock value.

Apart from the telecom services companies, there are a number of independent tower companies including American Tower Co, GTL Infrastructure, Quippo Telecom Infrastructure.

These companies may also be asked to pay licence fee. This will come as another blow to the stand-alone telecom companies who are already reeling under the rising cost of steel. Rising input costs are forcing tower companies to increase their rental price, which in turn is driving up the operational cost of telecom service providers.